Cheech and Chong and Reagan

The marijuana lobby searches for conservatives who hate taxes more than they hate drugs.

Former Reagan speechwriter Dana Rohrabacher, now a Republican representative from California, is mellow about the advent of legal marijuana.

Shuji Kajiyama/AFP/Getty Images

The “ultimate marijuana bill” sits on a table, next to crudités and crackers but at a safe distance from the red wine. It’s Tuesday evening inside the new office of the Marijuana Policy Project, where the small but ambitious cannabis lobby has cloistered before swarming Capitol Hill. Rep. Dana Rohrabacher, R-Calif., who co-wrote the “ultimate marijuana bill,” is filling his cup before giving a short speech. Ben Wu, the young CEO of a new California-based company called Kush Bottles, is telling me why his product can lock marijuana away from minors and transform the image of the pot business.

“All it takes is one bad event to get on CNN and discredit the industry,” he says.

Rob Kampia, the longtime executive director of MPP, quiets down the room and waves the ultimate bill—H.R. 1523, the Protect State Marijuana Laws Act—in the air. “If you’re reading-impaired,” he says, “this is how long it is.” It’s one page long, and would clarify that some federal drug laws did "not apply to any person acting in compliance with State laws relating to the production."*

Over a few days this week, the National Cannabis Industry Association started a third year of selling Congress on quasi-legal federal recognition of marijuana. There are a few ways of doing this; H.R. 2240, also co-sponsored by Rohrabacher and Democrats, would end the tax code's current prohibition on deductions or credits for businesses dealing with controlled substances, for any “marijuana sales conducted in compliance with State law.”​ Sixty-five representatives of the 450-member business association RSVP’d for the push. Most of them made it to the Hill.

Michael Correia, who’s been NCIA’s director of government relations for just a few months, came from the office of Rep. Diane Black, R-Tenn., and is now trying to sell just enough of the party on an issue that many of them identify as part of the rot of the 1960s. Kampia tells his audience—cannabis product manufacturers, lobbyists, and possible Rohrabacher donors—that their goal is to “ultimately change the law so that marijuana is regulated like alcohol.”

The congressman from Orange County summoned his best Tommy Chong impression and puffed an invisible joint.

Rohrabacher has been trying at this for a decade, not getting very far. “I was Ronald Reagan’s speechwriter,” he tells the crowd. “If you take a look at Ronald Reagan’s speeches on drugs, and if you looked real close, you can tell which ones I worked on. Reagan would make it clear that our goal was not to put people in jail.”

But the new cannabis lobby’s first problem comes straight out of the tough-on-crime push of the Reagan years. In 1982, the start of his iteration of the “war on drugs,” Reagan approved 280E, the line of tax law that prevents drug profit tax deductions. For decades it was a useful legal tool against dealers and an occasional source of would-you-believe-it news about people hiding their drug money.

Only this year, with the birth of the legal marijuana industry in Colorado and Washington state, has this law produced the sort of victim that Congress tends to protect. Legal dispensaries are making millions and are unable to deduct the profits. They can’t convince banks to take their money or place ATMs in their stores. After a few weeks of Colorado sales, the Department of Justice issued a memorandum to prosecutors, asking them to lay off and let banks work with the dispensaries.

“You can’t deduct rents, payroll, so it’s been a tough sale for us to come out and get capital from investors,” says Pete O’Neil, managing partner of Seattle’s C&C dispensary.

O’Neil got lucky. “We had to register with the SEC after we did our first sale,” he says. “I had to call to file it, and I said, ‘Hey, I’m trying to get information about the Form B.’ The guy on the line said, ‘What are you doing?’ I said, ‘I own a legal marijuana dispensary.’ He says, ‘Stay on hold.’ I think: ‘Oh, shit.’ He comes back, and he’s like, ‘Mr. O’Neil, can you repeat what you just said to me?’ I repeat it, and I hear the other guy on the line say, ‘Oh man, isn’t that cool?’ ” O’Neil laughs at the memory. “Thank God for stoners.”

But the industry can’t rely on stoners alone. “We have turned a corner,” says Rohrabacher. “This issue is no longer a counterculture issue. Always, in the past, when you talked about marijuana, you’d have someone say, ‘Whoa man, what’s going on here?’ ” The congressman from Orange County summoned his best Tommy Chong impression and puffed an invisible joint. “In fact, the turning point in public opinion has happened just in time. For the first time, the polls indicate I’m actually gaining votes by taking this stand on marijuana. How stupid it is to spend billions and billions of dollars, all of the time of our courts, to prevent someone from smoking a weed they can grow in their backyard?”

On Wednesday morning the lobbyists headed to Congress, armed with talking points and a letter from Grover Norquist. In September the president of Americans for Tax Reform had asked House Ways and Means Committee Chairman Dave Camp to support the ultimate marijuana bills. “H.R. 2240 corrects a mistake in the tax code Congress never intended to create,” wrote Norquist. “In an attempt to deny tax deductions connected to the illegal drug income of street dealers, Congress accidentally imposed a gross receipts tax on legal cannabis dispensaries a generation later.”

“Grover is totally on board with fixing 280E,” says Blayne Sapelli, a 25-year-old working on a smoke-free cannabis startup and lobbying members of Congress from Connecticut. “That’s pretty sweet.”

I head over to the Heritage Foundation’s monthly Conversations With Conservatives panel, where marijuana’s not likely to come up at all. As it wraps I ask a few of the House’s most right-wing members, the guys who run the place, if there’s any interest in the cannabis bills. Texas Rep. Joe Barton, who’s been in the House since 1985, sounds utterly baffled when (with an assist from a more eloquent reporter) I explain the issue.

“I don’t think marijuana helps people,” says Barton. “I think it hurts over time. I don’t want Congress to pre-empt the state of Colorado. If the banks won’t take the money, well, good for the banks. If inadvertent regulation of banks prevents people from using marijuana, I’m for preventing people from using marijuana.”

A few minutes later, I pose the same question to Indiana Rep. Marlin Stutzman, elected in the 2010 Tea Party wave, and 27 years younger than Barton. He starts out criticizing the Obama administration for its abuse of power, which makes sense, as later in the day the House will pass a bill making it easier to sue the president.

“The attorney general is, again, moving without Congress,” he says. “But I think that we should have hearings on it. We need to realize that there are consequences to laws and referendums that pass in the states when it comes to banks and interstate commerce.

There are problems when we legalize drugs because of the infrastructure behind it.

The flow of money is being forced on them. There’s concern about the soundness, the integrity behind the dollars. When you have several states that are now approving marijuana, it’s going to affect the country ways we may not have thought of.”

In other words: Sure, he’ll look at it. So will Alabama Rep. Spencer Bachus, the retiring chairman emeritus of the House Financial Services Committee, whom I talk to later in the lobbying day, and who is at least open to the idea of banks taking the money.

“If Colorado law allows them to do it lawfully, then I think the bank is entitled to take the money,” says Bachus. “I’d be for addressing it. I’m not for people hiding their money in mattresses and getting robbed.”

When the day ends, I catch up with the lobbyists in the beige vending machine sector of the Rayburn Building. They sit and talk over packaged snacks and vitamin-infused waters. No breakthroughs just yet.

“I was in [New York Sens. Chuck] Schumer and [Kirsten] Gillibrand’s offices, and they seemed disinterested in the issue,” said Steve Trenk of AcquiFlow. “We got a lot of platitudes about seeing what happens.”

Another lobbyist says this might have been a small victory. If Schumer isn’t concerned with the push, he’s out of “drug warrior” mode. He’s not going to oppose the bill—if the House actually moves the bill. If a trend-spotter like Schumer sees no upside in attacking legal marijuana banking or tax deduction (we are talking, after all, about a senator who briefly decided that the Dubai Ports deal was a threat to America), there are no enemies to the left.

The next morning, on the last day of lobbying, the NCIA gather in the Cannon Building to package their message for the press. The hook: An appearance by Celinda Lake, a Democratic pollster who would explain that marijuana’s victory was preordained.

“Demographic destiny is marching on,” says Lake. “Marijuana is one of the few issues that mobilizes progressive voters without any backlash.”

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"“All it takes is one bad event to get on CNN and discredit the industry,” he says." Good thing the booze and tobacco and firearms industries have so far avoided any "bad events". More...

Rohrabacher sits in the first row of chairs, eyeing Lake with no apparent reaction. He gets up; he argues that his team should already be backing these bills, his bill especially, no matter whether progressives or the counterculture or whoever else are for it.

“If it was a secret ballot,” says Rohrabacher, “a majority of my Republican friends would have voted for this.”

*Correction, March 14, 2014: This article originally misstated that Dana Rohrabacher was discussing H.R. 2240 in his speech to the Marijuana Policy Project. He was discussing H.R. 1523.